An inquiry is being launched into the way estate agents treat people who are buying and selling homes.

The Office of Fair Trading (OFT) said the study would investigate whether the market was working in the interests of consumers.

The inquiry will focus on fees, competition and how well the 1979 Estate Agents Act, which governs estate agents' behaviour and the transaction process, is working.

(It) will show once and for all if estate agents are operating properly

Hugh Dunsmore-Hardy, Nat Assn of Estate Agents

It is also expected to ask if some practices are actually contributing to spiralling house prices.

There have been allegations that some estate agents have been involved in gazumping and overcharging customers.

Growing complaints

John Vickers, director general of fair trading, said: "Buying or selling a home is the largest transaction that most people make, so it is essential that consumers are able to understand the process and the options open to them.

The Estate Agents Act 1979

Regulates estate agent's work

To make sure an estate agent acts in the best interests of their clients

To ensure both buyers and sellers are treated honestly, fairly and promptly

"This comprehensive study will tell us whether the market is working well for consumers."

Residential sales account for about three-quarters of total revenue of the estate agents in England and Wales.

The OFT said there were signs of increasing concern from consumers about the services they receive.

For example, the Estate Agents' Ombudsman says the number of complaints it receives has gone up 25% over the past year.

In addition, there were almost 5,000 complaints to Trading Standards Offices, mostly related to selling techniques.

The report comes at a time when house prices are in the spotlight.

According to figures from the Halifax, the price of the average house in the UK is now £107,152, 18.5% more than a year ago.

Investigation probe

The OFT report will focus on the following areas:

Fee structures - how they are changing and evidence on value for money

The nature and effectiveness of competition in the market

How well the Estate Agents Act is working to protect consumers

- comparisons with Scotland, where solicitors have a greater role in the house buying and selling process, and with other countries.

The study will take about a year, and could result in enforcement action by the OFT, referrals to the Competition Commission or result in recommendations to change the law if the trading watchdog finds faults.

The OFT has banned estate agents in the past, and has new powers under the "Stop Now" orders which allow it to act swiftly against rogue traders or unfair practices.

Following the ban of one agent in February 2002, Mr Vickers said: "The housing market must be safe from unfit estate agents."

Industry's defence

Hugh Dunsmore-Hardy, chief executive of the National Association of Estate Agents, told BBC Radio Five Live that he welcomed an inquiry.

"I don't believe that these practices are rife, I don't believe that they are extensive.

"What the OFT is trying to do here is to carry out a proper piece of research to separate anecdotal evidence from reality," he said.

Mr Dunsmore-Hardy added that he would welcome statistics "that will show once and for all if estate agents are operating properly".